hollyspencerweek3word2 - Corporate Finance Calculate the following time value of money problems 1 If you want to accumulate \$500,000 in 20 years how

# hollyspencerweek3word2 - Corporate Finance Calculate the...

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Corporate Finance Calculate the following time value of money problems: 1.If you want to accumulate \$500,000 in 20 years, how much do you need to deposit today that pays an interest rate of 15%? 2.What is the future value if you plan to invest \$200,000 for 5 years and the interestrate is 5%? \$200,000 x [1(.05 x 5)] = \$200,000 [1(.25)] = \$200,000 (.25) = 3.What is the interest rate for an initial investment of \$100,000 to grow to \$300,000in 10 years? 4.If your company purchases an annuity that will pay \$50,000/year for 10 years at a 11% discount rate, what is the value of the annuity on the purchase date if the first annuity payment is made on the date of purchase? Annuity*(1-(1+r)^-n)/r *(1+r)50000*(1-(1+11%)^-10)/11% *(1+11%)value of the annuity = 326852.3850,000 10 .11 \$326,852.38 value of annuity
5.What is the rate of return required to accumulate \$400,000 if you invest \$10,000 per year for 20 years. Assume all payments are made at the end of the period. On excel spread sheetCalculatethe project cash flow generated for Project A and Project B using the NPV method. On excel spread sheet. Which project would you select, and why? I would choose project B because itlooks like you would earn more money with the project. Which project would you select under the payback method? The discount rate is 10% for both projects. I would choose project A for this one because your money would be recovered in two years, the other isn’t fully recovered untilthe 3rdyear.